Chapter 10 Suggested approaches to end-of-chapter questions

Free movement of goods I: tariff & tax barriers
1. The four commonly recognised stages in economic integration are: Free Trade Area; Customs Union; Common Market; Economic Union. Define each of these terms, and Identify which stage has been reached by the EU.

A free trade area involves the removal of customs duties between member states. However, the members of a free trade area decide themselves their external policies and any duties payable by third party countries wishing to export goods into those countries. Different states may therefore have different external tariffs so exporters to the free trade area (FTA) may target their imports on the country with lower import duties or tariffs. Any goods entering will compete with internal goods of the free trade area therefore certification of origin and a further import duty may be required both of which are difficult and expensive to administer.

A customs union creates a common external tariff, presenting a common position to the outside world. The same duties are imposed on goods entering the customs union regardless of where they are imported from. Once imported, the goods circulate freely as union goods throughout the union.

A common market adds to the above definitions by providing policies and legal regimes for the free movement of the factors of production (goods, persons, and capital) and a competition policy.

An economic union would be all of the above plus the harmonization or unification of economic, monetary, and fiscal policies including the creation of a common currency controlled by a central authority. An economic union is, in fact, a rather rare development with few historical examples.

Which Stage has the EU Reached?

Whilst its goals are clear, as outlined above, just how far has the EU progressed? Note that the EU was never intended to be just a free trade area, it was always intended to go much further. Articles 26 and 28 TFEU make it clear that a customs Union should be established which includes an internal market. The EU certainly has a customs union with a Common Customs Tariff which is exclusively regulated by the Commission. The degree to which a true common market has been achieved is more doubtful given the considerable case law still arising which is evidence of the sheer number of obstacles still in the way of the unified market. However, as from 1 January 2015, nineteen countries, which now represents over half of the member states, have gone further and established an economic and monetary union with a European central bank and a single currency.

2. What, according to the CJEU, is a charge having equivalent effect?

'any pecuniary charge, however small and whatever its designation and mode of application, which is imposed unilaterally on domestic or foreign goods by virtue of the fact that they cross a frontier.'

3. When is it acceptable to impose a charge on imported goods?

In case 46/76 Bauhuis v The Netherlands, the Court of Justice held that a fee for health inspections would be acceptable if required by a Community (EU) Regulation and covering the actual cost incurred only.

This was followed up in Case 18/87 Commission v Germany (Animal Inspection Fees) in which the Court of Justice held that a charge may escape classification as a CHEE. In this case, fees for inspections carried out under the requirements of Council Directive 81/389 were held to be acceptable. According to the Court of Justice they satisfied the criteria that:
(i) the fees constituted a payment for a service, not exceeding the cost of the actual inspections in respect of which they are charged;
(ii) the inspections in question were mandatory and uniform for all the products in question in the Community (EU);
(iii) the inspections were provided for by Community (EU) law in the interests of the Community; and;
(iv) the inspections promoted the free movement of goods in particular, by neutralizing the obstacles which may result from unilateral inspection measures adopted under Article 30 of the EC Treaty (now 36 TFEU).

4. Under what circumstances is it possible to impose a tax on imported goods?

A charge may be justified if it is an aspect of an internal taxation system. If the charge forms part of a system of internal taxation rules, which are applied systematically and under the same criteria to domestic products and imported products alike, it is a non-discriminatory tax and if questioned should be considered under Article 110 TFEU and not under Article 30 TFEU.

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